From the Editor

The Inequality Issue, Fall 2017

GLOBALLY SPEAKING, the standard of living has never been higher. According to the United Nations, 200 million fewer people are now living in extreme poverty than 25 years ago, and life expectancy increased by five years between 2000 and 2015 — the fastest increase since the 1960s. In other words, in many important ways, the world itself is more equal than it has ever been.

And yet, in advanced economies, the gap between the rich and the poor is at its highest level in decades — leading the World Economic Forum to identify income inequality as “the most challenging problem the world faces today.”

The discourse on inequality often makes a distinction between inequality of outcome (as measured by income or wealth) and inequality of opportunity (attributed to circumstances beyond an individual’s control, such as gender, sexual orientation or family background). As we have seen recently, high levels of both types of inequality come with significant social costs.

It is not surprising, then, that the extent of inequality, its drivers — and what to do about it — are hotly-debated issues. In this issue of Rotman Management, we look at some of the key issues related to both inequality of opportunity and inequality of outcome, and show what today’s leaders can do to address both.

Boston Consulting Group Chairman Hans-Paul Bürkner recently noted that in today’s global economy, many people feel trapped, and “they want their futures back.” To facilitate this, he says, the world’s leaders need to focus on one goal: Delivering inclusive growth. On page 20, the World Economic Forum’s Richard Samans et al. discuss Rising to the Challenge of Inclusive Growth.

We waste untold innovative potential if we do not provide a level playing field for all.

In Canada, the top 1% earns more than 10 times as much as the average Canadian and inequality is most pronounced in our cities: Toronto, Vancouver and Montreal have the country’s highest levels of income inequality. On page 28, Rotman Professor Richard Florida looks at the key causes of what he calls The New Urban Crisis.

Elsewhere in this issue, we feature former TD Bank CEO Ed Clark in our Thought Leader Interview on page 14, and in our Idea Exchange, Harvard Behavioural Economist Iris Bohnet describes how to ‘design’ diversity on page 90; inequality expert Branko Milanovic explains who has gained the most from globalization on page 98; Bank of America’s Jackie Vanderbrug talks about investing with a ‘gender lens’ on page 112; and Rotman faculty Daniel Trefler, Stéphane Côté, Daehyun Kim and Will Mitchell present their latest research findings.

In Why Nations Fail, Daron Acemoglu and James Robinson write: “The real reason to worry about economic inequality is not the unfairness of it all. The problem is that economic inequality often comes bundled with inequality of opportunity and political inequality.”

As they note — and few would argue — prosperity depends upon innovation. The truth is, no one knows where the next Google or Amazon will come from, and we waste untold innovative potential if we do not provide a level playing field for all.